Circular No. 19/19/2017-GST

F. No. 354/263/2017-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax research Unit
****

North Block, New Delhi

20th November 2017

To,

The Principal Chief Commissioners/Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) /

The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Subject: Clarification on taxability of custom milling of paddy – regarding.

Representations have been received seeking clarification on whether custom milling of paddy by Rice millers for Civil Supplies Corporation is liable to GST or is exempted under S. No 55 of Notification 12/2017 – Central Tax (Rate) dated 28th June 2017.

2. The matter has been examined. S. No 55 of Notification 12/2017- Central Tax (Rate) exempts carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products or agricultural produce. Agricultural produce has been defined in the notification to mean, any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. Job work has been defined under section 2 (68) of the CGST Act to mean any treatment or process undertaken by a person on goods belonging to another registered person. Further, under Schedule II (para 3) of the CGST Act, any treatment or process which is applied to another person’s goods is a supply of service.

3. Milling of paddy is not an intermediate production process in relation to cultivation of It is a process carried out after the process of cultivation is over and paddy has been harvested. Further, processing of paddy into rice is not usually carried out by cultivators but by rice millers. Milling of paddy into rice also changes its essential characteristics. Therefore, milling of paddy into rice cannot be considered as an intermediate production process in relation to cultivation of plants for food, fibre or other similar products or agricultural produce.

4. In view of the above, it is clarified that milling of paddy into rice is not eligible for exemption under S. No 55 of Notification 12/2017 – Central Tax (Rate) dated 28thJune 2017 and corresponding notifications issued under IGST and UTGST Acts.

5. GST rate on services by way of job work in relation to all food and food products falling under Chapters 1 to 22 has been reduced from 18% to5% vide notification No. 31/2017-CT(R) [notification No. 11/2017-CT (Rate) dated 28.6.17, S.No. 26 refers]. Therefore, it is hereby clarified that milling of paddy into rice on job work basis, is liable to GST at the rate of 5%, on the processing charges (and not on the entire value of rice).

6. Difficulty if any, in the implementation of the circular should be brought to the notice of the Board. Hindi version would follow.

Yours Faithfully,

Susanta Mishra

Technical Officer (TRU)

Email: susanta.mishra87@gov.in

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Category : Goods and Services Tax (8053)
Tags : goods and services tax (6504) GST (6105)

4 responses to “Clarification on taxability of custom milling of paddy – regarding”

  1. PARAS CHHAJED says:

    In Chhattisgarh state the Goverment is procuring Paddy at support price from farmers through various Co-opertive Societies. The Paddy so procured is then issued to Rice Mills for custom milling of paddy and Rice is delivered to Government through State Civil Supplies Corporation for sale through Fair Price Public Distribution System.

    For Custom Milling the the service charges as fixed by the Central Government is paid on which GST is also paid by the Government.

    When a rice miller mills additional quantity he is paid Protsahan Rashi  (Additional Encouragement Amount) based on quantity milled but the Government is not paying GST on this.

    Please guide as to whether this Protsahan Rashi is not liable to GST ? If so kindly share relevant provision / notification. Thanks

  2. Tarun Munjal says:

    Then what is the status of, application of wax on fruits like oranges, Apple etc, process to be done in a Waxing Plant. Please clarify,

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